The Financial Services Compensation Scheme (FSCS) is known as a ‘fund of final resort’. Created by the Financial Services and Markets Act 2000, it is available for consumers of authorised financial service providers. The scheme will deal with customers’ claims against funds or assets should the company fail e.g. default or stop trading and will award compensation where necessary.
The FSCS is free to use for any customer that needs assistance. Consumer’s money will be protected if it is in a UK bank, building society or credit union up to £85,000. For deposits and savings that are in a joint account, the consumer will be protected up to £170,000.
The FSCS will protect:
- Insurance policies
- Investment business
- Home finance (for those on or after 31st October 2004)
- Insurance brokering (for policies on or after 14th January 2005)
- Travel insurance when the policy is taken out alongside a holiday or travel booking (for policies on or after 1st January 2009)
The main objectives of the FSCS are:
- Aiming to provide a quality compensation scheme that is fair and efficient
- To provide a cost effective and fully accountable compensation service
- Working to recover monies from defaulted firms quickly
- Providing a good working partnership with other regulatory bodies to benefit the UK’s regulatory framework
- Provide regular and easily accessible information to all consumers